__NOTOC__ The Scandinavian Monetary Union was a

monetary union A currency union (also known as monetary union) is an intergovernmental agreement that involves two or more states sharing the same currency. These states may not necessarily have any further integration (such as an economic and monetary union ...

formed by

Denmark Denmark is a Nordic countries, Nordic country in Northern Europe. It is the metropole and most populous constituent of the Kingdom of Denmark,, . also known as the Danish Realm, a constitutionally unitary state that includes the Autonomous a ...

and

Sweden Sweden, formally the Kingdom of Sweden, is a Nordic countries, Nordic country located on the Scandinavian Peninsula in Northern Europe. It borders Norway to the west and north, and Finland to the east. At , Sweden is the largest Nordic count ...

on 5 May 1873, with

Norway Norway, officially the Kingdom of Norway, is a Nordic countries, Nordic country located on the Scandinavian Peninsula in Northern Europe. The remote Arctic island of Jan Mayen and the archipelago of Svalbard also form part of the Kingdom of ...

joining in 1875. It established a common currency unit, the krone/krona, based on the

gold standard A gold standard is a backed currency, monetary system in which the standard economics, economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the ...

. It was one of the few tangible results of the Scandinavian political movement of the 19th century. The union ended during World War I.

Overview

The original Scandinavian currencies were based on the silver

Reichsthaler The ''Reichsthaler'' (; modern spelling Reichstaler), or more specifically the ''Reichsthaler specie'', was a standard thaler silver coin introduced by the Holy Roman Empire in 1566 for use in all German states, minted in various versions for the ...

, defined by the Hamburger Bank as 25.28 grams fine silver, which was equal to one Norwegian speciedaler or two

Danish rigsdaler The rigsdaler was the name of several currencies used in Denmark until 1875. The similarly named Reichsthaler, riksdaler and rijksdaalder were used in Germany and Austria-Hungary, Sweden and the Netherlands, respectively. These currencies were of ...

. Sweden's ''riksdaler specie'' was slightly heavier at 25.5 g and was equal to four

Swedish riksdaler The Svenska riksdaler () was the name of a Swedish coin first minted in 1604. Between 1777 and 1873, it was the currency of Sweden. The daler, like the dollar,''National Geographic''. June 2002. p. 1. ''Ask Us''. was named after the German Thal ...

''riksgalds''. The Scandinavian switch to the

was triggered by Germany's adoption of the

German gold mark The German mark ( ; sign: ℳ︁) was the currency of the German Empire, which spanned from 1871 to 1918. The mark was paired with the minor unit of the pfennig (₰); 100 pfennigs were equivalent to 1 mark. The mark was on the gold stand ...

in 1873 and of the consequent disturbance in the silver market. The monetary union established the gold krone (''krona'' in Swedish) replacing the legacy currencies at the rate of 1 krone = 1

= Norwegian speciedaler = Hamburg reichsthaler. The latter's conversion to 4.50

s (hence, 1 krone = 1.125 marks) established the gold parity of the krone: one gram of fine gold worth 2.79 marks was equivalent to 2.48 krone (or 0.4032 g gold per krone). The

British pound Sterling (Currency symbol, symbol: Pound sign, £; ISO 4217, currency code: GBP) is the currency of the United Kingdom and nine of its associated territories. The pound is the main unit of account, unit of sterling, and the word ''Pound (cu ...

(the "world currency" of the time) was equal to 18.16 kroner, and the franc of France and the

Latin Monetary Union The Monetary Convention of 23 December 1865 was a unified system of coinage that provided a degree of monetary integration among several European countries, initially Belgium, France, Italy and Switzerland, at a time when the circulation of bank ...

was worth 0.72 krone. Sweden's long-established tradition of using paper currency eased the implementation of a Gold Exchange Standard wherein gold coins rarely circulated but the respective

central bank A central bank, reserve bank, national bank, or monetary authority is an institution that manages the monetary policy of a country or monetary union. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the mo ...

s (the

Sveriges Riksbank Sveriges Riksbank, or simply the Riksbank, is the central bank of Sweden. Founded in 1668, it is the world's oldest surviving central bank, and the third oldest bank in continuous operation. Prior to World War I, it was also the only state- ...

Danmarks Nationalbank Danmarks Nationalbank (in Danish often simply ''Nationalbanken'') is the central bank of the Danish Realm, Kingdom of Denmark. It is a non-eurozone member of the European System of Central Banks (ESCB). Since its establishment in 1818, the objecti ...

and

Norges Bank Norges Bank (, , ) is the central bank of Norway. It is responsible for managing the Government Pension Fund of Norway, which is the world's largest sovereign wealth fund, as well as the bank's own foreign exchange reserves. History The histor ...

) centralized their respective gold reserves and guaranteed the conversion of krone banknotes to gold for export purposes. The union provided fixed exchange rates and stability in monetary terms, but the member countries continued to issue their own separate currencies. Although not initially foreseen, the perceived security led to a situation where the formally separate currencies were accepted on a basis of "as good as" the

legal tender Legal tender is a form of money that Standard of deferred payment, courts of law are required to recognize as satisfactory payment in court for any monetary debt. Each jurisdiction determines what is legal tender, but essentially it is anything ...

virtually throughout the entire area. Upon acceding to the union, Sweden had the name of its currency changed from Riksdaler Riksmynt to

Swedish krona The krona (; plural: ''kronor''; sign: kr; code: SEK) is the currency of Sweden. Both the ISO code "SEK" and currency sign "kr" are in common use for the krona; the former precedes or follows the value, the latter usually follows it but, espec ...

. The word "krone/krona" literally means "

crown A crown is a traditional form of head adornment, or hat, worn by monarchs as a symbol of their power and dignity. A crown is often, by extension, a symbol of the monarch's government or items endorsed by it. The word itself is used, parti ...

", and the differences in spelling of the name represent the differences between the

North Germanic languages The North Germanic languages make up one of the three branches of the Germanic languages—a sub-family of the Indo-European languages—along with the West Germanic languages and the extinct East Germanic languages. The language group is also r ...

. The political union between Sweden and Norway was dissolved in 1905, but this did not affect the basis for co-operation in the monetary union. All three countries still use the same currencies as during the monetary union, but they lost their peg, one to one, in 1914. The

Icelandic króna The króna () or krona (sometimes called Icelandic crown; currency sign, sign: kr; ISO 4217, code: ISK) is the currency of Iceland. One króna was formerly divided into 100 eyrir (plural "aurar"). Name Like the other Nordic countries, Nordic ...

is a derivative of the Danish krone, established after

Iceland Iceland is a Nordic countries, Nordic island country between the Atlantic Ocean, North Atlantic and Arctic Oceans, on the Mid-Atlantic Ridge between North America and Europe. It is culturally and politically linked with Europe and is the regi ...

was elevated to a separate kingdom in union with Denmark in 1918. Iceland cut its ties to Denmark in 1944 and became a republic. The Icelandic króna soon became volatile, causing a high inflation and in 1980 a currency reform was introduced, in which 1 new Icelandic króna was set to 100 original ones. The Scandinavian Monetary Union was inspired by the

, established in 1865. As Scandinavia became industrialized, a call for a firm monetary system had risen in the 1860s. The idea of using a foreign currency was discussed, but as the old dividing of the

British Pound Sterling (Currency symbol, symbol: Pound sign, £; ISO 4217, currency code: GBP) is the currency of the United Kingdom and nine of its associated territories. The pound is the main unit of account, unit of sterling, and the word ''Pound (cu ...

was similar to what Scandinavia wished to get rid of, the French defeat in the

Franco-Prussian War The Franco-Prussian War or Franco-German War, often referred to in France as the War of 1870, was a conflict between the Second French Empire and the North German Confederation led by the Kingdom of Prussia. Lasting from 19 July 1870 to 28 Janua ...

made the French Franc less attractive and as the German Mark was out of the question in Denmark after the 1864

Second Schleswig War The Second Schleswig War (; or German Danish War), also sometimes known as the Dano-Prussian War or Prusso-Danish War, was the second military conflict over the Schleswig–Holstein question of the nineteenth century. The war began on 1 Februar ...

, the idea of a Scandinavian Monetary system based on the

Gold standard A gold standard is a backed currency, monetary system in which the standard economics, economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the ...

was imposed 1873 to 1875. The union was dissolved gradually from the outbreak of

World War One World War I or the First World War (28 July 1914 – 11 November 1918), also known as the Great War, was a global conflict between two coalitions: the Allies (or Entente) and the Central Powers. Fighting took place mainly in Europe and th ...

until 1924, when the union formally was dissolved. Nevertheless, the 1:1:1 banknote rate continued at least until the economical crisis in the early 1930s. Whether the Scandinavian Monetary Union was a success has been a subject of discussion. Some experts observe it functioned best between 1901 and 1905, at which point it was a complete system of coin, banknotes and common drawing rights available to the central banks. Although it was effective in its own limited monetary terms, the Union, however, was only of minor importance in the total foreign relations of the member countries. Moreover, the trade between the member countries composed only a small part of their total trade, a share that was in decline during the lifetime of the Union. The monetary union was never accompanied by a tariff union as well. This stresses its partial nature - it never formed a vital part of these countries' international economic relations. Other experts take a more positive view, arguing that no other politically independent countries went equally far in their monetary integration. From an international perspective, it was the most successful of all monetary unions during the time of the classic

.Lars Jonung

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Overview

See also

Economics

Banks

Currencies before the union

Currencies during and after the union

References

Further reading